The evolving world of WiMAX gained a new aura of respectability when silicon kingmaker Intel threw its weight behind the pre-standard broadband wireless technology in 2003 and its investor arm, Intel Capital, pledged $150 million to help nurse the fledgling sector starting last year. But despite Intel's considerable influence, venture capitalists are largely reluctant to follow in Intel's big footprints and invest in WiMAX, according to analysts.

On the subject of WiMAX, “Now [VCs] just roll their eyes at Intel,” said Tad Neely, an RHK analyst.

The current level of VC interest in WiMAX is “fairly high but less enthusiastic than the Wi-Fi semi-bubble of 2003-ish,” said Caroline Gabriel, research director of Rethink Research Associates. “In the U.S. in particular, there is some trepidation among the pure VCs because of the bad associations with previous broadband wireless failures like Teligent.”

Part of investors' hesitancy stems from the sheer complexity of the business — the need for spectrum and standards, and the din of competing wireless broadband technologies such as EV-DO, HSDPA and Wi-Fi. But the eye-rolling also may be partly a function of the inherent impatience of the VC mind, stimulated by Intel's cheerleading and frustrated by the reality that mobile WiMAX isn't expected until 2008. “VCs have to make different returns than Intel does,” Neely said. “[Intel has] created such PR momentum behind [WiMAX] that everybody's expecting something tomorrow, and nothing's going to happen tomorrow.”

At a WiMAX panel discussion last November, Manijeh Moghis — president of CommTec Consulting and chair of the VC Task Force's wireless group — perceived two camps of VCs: One camp simply disagreed that WiMAX is as promising as Intel claims. The other camp saw the value of WiMAX but also believed the opportunity it brings really belongs to large companies rather than start-ups, essentially leaving VCs out of the game.

“[VCs] believe there is no play [for them],” Moghis said.

Not all VCs feel that way, evidently. Those open to WiMAX seem particularly interested in WiMAX chips, applications and roaming software, Gabriel said. California chip start-up TeleCIS roughly doubled its total funding in December with a $4 million B round from ATA Ventures. Canadian chip vendor Wavesat closed an oversubscribed $10.5 million round of VC funding last fall, including $2.5 million from a pension fund. (In March, the Canadian government's National Research Council ponied up an additional $900,000 for the development of a Wavesat mobile WiMAX chip.) And in February, French chip start-up Sequans Communications announced an oversubscribed $9 million B round from European sources.

With a confusing array of competing wireless broadband technologies such as EV-DO, HSDPA and Wi-Fi, investors are growing increasingly interested in chips and software that might enable handoffs between WiMAX and other forms of wireless broadband. Thus, in February, Liberty Partners invested $10 million in roaming-software vendor Padcom.

For WiMAX to work economically (one of the main sticking points of which involves lowering the cost of its customer premises equipment from more than $200 to less than $100), it must be manufactured and deployed in large volumes by big vendors such as Alcatel, Lucent Technologies, Siemens and Nortel Networks — or so the theory goes — which is why VCs feel left out. However, the applications that will ride on future WiMAX networks (interactive games, for example) could well be developed by start-ups, which is why VCs could find an important role at that level, so long as they can wait for the networks to be built first.

Investors skeptical of WiMAX say they're waiting for a large service provider deployment to prove the business case. That's mainly why Intel Capital has invested in service providers such as Clearwire and Seattle broadband provider Speakeasy, which are planting flags in this new frontier. Speakeasy plans to roll out a commercial WiMAX service in downtown Seattle next month, charging $700 or $800 per month for 3 Mb/s of symmetrical broadband, offering 100% more bandwidth than a T-1 for only 50% more in price and installing in days what typically takes rivals weeks.

Though Speakeasy CEO Bruce Chatterley would only say Intel Capital's investment was “more than $1 million,” he also said Speakeasy collected a total of $27 million — including Intel money — in its latest round, and a company press release lists the amount of that round (excluding Intel) as $24 million, suggesting a $3 million Intel contribution.

According to Chatterley, Speakeasy's plan to roll out WiMAX preceded (and in fact prompted) Intel's investment, not the other way around. And although Speakeasy's deployment costs are now covered, the biggest benefits of the Intel partnership are strategic rather than financial, he said, adding proudly, “We're now in the Intel Capital family.” To its family members, Intel has been an eager matchmaker, introducing Speakeasy to large service providers that could help the broadband provider get bulk prices on WiMAX equipment, Chatterley said.

“There's a lot more serious attention paid to Speakeasy combined with a much larger player,” he said. “That gets us the attention of suppliers in terms of giving us forward pricing today, ahead of volume.”

Intel is also introducing the world's WiMAX-curious to New York-based service provider TowerStream, which is offering pre-WiMAX broadband as a sort of T-1 alternative to small and medium-sized businesses in eight markets (on the way to 10). Though Intel recently paid to produce a video “demo” reel publicizing TowerStream's accomplishments, the start-up is profitable on its own, with hundreds of customers, and hasn't taken Intel Capital money, said Jeff Thompson, TowerStream's president, co-founder and chief operating officer. If TowerStream did want more funding, however, it wouldn't have to look far, he said.

“We sometimes get five or 10 VCs calling us in a week.”

Though such deployments could do much to prove the WiMAX business model, a “onesie, twosie” TowerStream model will likely only appeal to small VCs, said RHK's Neely.

“It's kind of a $3 million to $4 million deal,” he said. “That's why I don't think they get a lot of VC interest.” And although T-1 service isn't quite the vision of mobile broadband that Intel has trumpeted for WiMAX, TowerStream is laying a foundation of infrastructure whose ultimate value can't yet be known.

The real proof of the business case will come when service providers deploy WiMAX without financial help from a biased strategic partner. “I don't think it's necessary [for Intel Capital to fund service providers],” said Carlton O'Neal, vice president of marketing for publicly traded Alvarion. “In the end, if there's a good business case for those companies, they'll find funding wherever they might need to.”

On the eve of the Cellular Telecommunications & Internet Association's Wireless 2005 show last month, AT&T announced a trial of pre-WiMAX technology, but the trial involved only two enterprises in New Jersey. At the Web 2.0 Conference last October, AT&T Chief Technology Officer Hossein Eslambolchi said the carrier would roll out WiMAX in 2006, thus obtaining a wireless last mile with which to bypass the Baby Bells and defray some of its multibillion-dollar annual access charges. But since then, AT&T has agreed to merge with SBC Communications — an even more effective way to save on access fees. And the carrier's precise plans for WiMAX are unknown.

At the same conference, Covad CEO Charles Hoffman said his company would roll out commercial WiMAX service in 2005. But the only carriers in the U.S. that can deploy WiMAX with licensed spectrum are Sprint PCS and Nextel, which are merging to become the only carrier capable of doing so.

Despite the uncertainties currently surrounding WiMAX deployment, even analysts such as Neely, who believe Intel has over-hyped the technology, still believe the chip giant's campaign to promote it will ultimately be successful. As Ron Resnick, president and chairman of the WiMAX Forum and marketing director for Intel's broadband wireless division, will attest, the number of members in the WiMAX Forum has grown from less than 50 to 250 in the last year, and the number of operator members has grown from three to 80.

“There are over 150 trials now, many not public,” Resnick said.

It's unknown how much of that interest is thanks to Intel alone.

“It's become more about politics than technology,” Moghis said, recalling a similar campaign by Qualcomm to get CDMA off the ground.

“Some VCs and limited partners in VCs will be disappointed at the speed at which it happens, but I think WiMAX will eventually work,” Neely said.

And he'll know when it happens because he'll see it in those VCs' eyes.

a WiMAX cheat sheet

With so many vendors and so many standards in the mix, you need a scorecard to keep track of which companies are spearheading the WiMAX revolution. Here are some of the companies developing network infrastructure gear for WiMAX.

Though it's still the nascent weeks of spring, 2005 has so far been a rough year for WiMAX. A series of postponements that plagued its certification-testing program throughout the previous year culminated in the delay of its 802.16-2004 standard plugfest from January to July 2005, effectively halting the release of products certified to official standards well into the latter half of the year. This latest setback was the opening critics and advocates of rival technologies were waiting for, strengthening their argument that WiMAX will never amount to more than a backhaul solution best-suited for delivering broadband access to underserved locales.

But the promise of WiMAX remains undeniable, especially with the fledgling 802.16e mobile WiMAX specification generating increasing momentum, and service providers cannot ignore the technology's economics (see charts). With a growing number of pre-certified products hitting the market, it's obvious that WiMAX is still coming — just not as quickly as many had predicted and hoped. Following is a series of profiles of 10 equipment developers that are shaping the WiMAX revolution as it continues its evolution. — Jason Ankeny

Alvarion: With more than 2 million units deployed in more than 130 countries worldwide, Alvarion has emerged as one of the industry's largest wireless broadband networking infrastructure providers. The company has bet heavily on WiMAX via its BreezeMAX WiMAX-ready product line, which is based on both the IEEE 802.16 and ETSI HiperMAN standards. In January, Alvarion announced the development of a mobile WiMAX solution based on the 802.16e mobile WiMAX specification, with trials expected to begin within the year followed by an official launch in 2006, timed to coincide with the commercial availability of WiMAX-enabled laptops and PDAs.

Airspan: A broadband wireless systems developer with about 300 customers in roughly 100 countries, Airspan is developing a family of IEEE 802.16-2004 WiMAX base stations, backhaul solutions and CPEs known collectively as AS.MAX. Airspan will begin trialing AS.MAX products with service providers during the second quarter of 2005 and expects commercial WiMAX network rollouts will begin in the quarter following. Last month, the company debuted a suite of self-installable indoor WiMAX products that connect desktop PCs, laptops, Internet-ready telephone sets and other broadband-enabled devices directly to operator networks.

Adaptix: Adaptix was launched in the summer of 2004 by president and CEO Vern Fotheringham, who a dozen years earlier co-founded Advanced Radio Telecom, one of the first start-ups to attempt to build a nationwide broadband wireless network. Adaptix leverages a software-defined radio technology platform to deliver pre-802.16e mobile broadband. Its NewHorizon line of access products includes software-controlled base stations, end-user terminals and network element management systems.

Alcatel: France's Alcatel needs no formal introduction. At February's 3GSM World Congress, the company announced it would partner with Intel to develop WiMAX solutions based on the 802.16e standard, establishing a timeline calling for field trials in early 2006 and commercial availability by mid-year.

Aperto Networks: Multiservice broadband wireless access systems provider Aperto is a founding member of the WiMAX Forum, contributing significantly to IEEE 802.16a/d and ETSI-BRAN standards. Its PacketWave line of base stations, subscriber units and associated antennas and radio offer point-to-multipoint and point-to-point system solutions for the 2.5 GHz, 3.5 GHz and 5 GHz frequency bands.

Axxcelera Broadband Wireless: Data networking company Axxcelera inaugurated 2005 by launching its first commercial 802.16-2004-compliant WiMAX products. Its ExcelMax platform operates in the licensed 3.3 GHZ to 3.7 GHz band and is aimed at residential, SoHo and SME users. It also supports both frequency division duplexing (FDD) and time division duplexing (TDD) applications. Its AB-Max platform operates in the license-exempt 5.2 GHz to 5.8 GHz band, supporting a variety of bandwidth, interface and CPE options to expand the number of customer applications that service providers can offer.

Motorola: Vendor giant Motorola first debuted its Canopy fixed wireless system in mid-2002, joining the WiMAX Forum two years later; at last month's CTIA Wireless 2005, the company debuted its Canopy WiMAX platform for the licensed 3.5 GHz band, which is available outside the U.S. Planned for commercial release in early 2006, the Canopy platform will include infrastructure, indoor and outdoor CPE and assorted management components, and is designed for migration to mobile services through 802.16e.

Navini Networks: Navini leverages phased-array smart antennas to provide portable plug-and-play access solutions promising seamless evolution to mobile WiMAX. Its Ripwave product line of portable zero-install, non-line-of-sight modems, base stations and element management systems operates across the full range of spectral frequencies. In late 2004 Navini partnered with service provider Unwired Australia to build what the company claims is now the largest non-line-of-sight commercial wireless broadband network in the world, covering more than 1200 square miles. After a few months of service, the network already counts about 14,000 users.

Nortel Networks: Also at CTIA Wireless 2005, networking solutions titan Nortel announced it will partner with electronics bigwig LG to jointly develop and market WiMAX products based on the 802.16e standard. Details are still sketchy, but the companies said they are planning customer trials for the second half of 2006.

Proxim: Wireless networking equipment developer Proxim creates broadband wireless and Wi-Fi networking gear for enterprise and service provider customers. In mid-2004, the company announced it would collaborate with Intel to develop a reference design for WiMAX CPE using 802.16a/d specification as well as 802.16e standards for mobile WiMAX deployments. Late last year Proxim launched its Tsunami BWA Software Platform, promising customers the tools necessary to develop WiMAX-ready applications today.

Redline Communications: Equipment-maker Redline was among the earliest entrants in the WiMAX derby, announcing its fully compliant 802.16a system back in the fall of 2003. Its first product, the AN-100, supports backhaul and access connections through point-to-point and point-to-multipoint deployments. At this past January's WCA International Symposium and Business Expo, Redline unveiled its WiMAX-ready AN-100U platform, which functions as both a base station and subscriber station.

SR Telecom: Canadian access solutions provider SR Telecom has been in business since 1981, with product deployments in some 130 countries. In late 2004 the company premiered its Symmetry platform, which it says is the first OFDMA-based WiMAX-ready platform on the market. The platform combines OFDMA modulation techniques with antenna diversity, hybrid-ARQ and sub-channeling technologies currently under consideration for use in the 802.16 e specification.

Wi-LAN: The foundation of Wi-LAN's broadband wireless access systems is its patented “W-for-‘wideband’” W-OFDM technology, which represents a critical element of the 802.11a standard. In late 2004, Wi-LAN announced its fourth-generation OFDM platform Libra MX, a solution including base stations and subscriber units that's designed to enable Wi-Fi hot zones, cellular backhaul, E-1/T-1 replacement, enterprise MTU/MDU and VoIP.

Equity Investment in WiMAX Related Companies, 2003-2004
U.S. venture-backed companies only

	2003					2004
Data	1	2	3	4	Total	1	2	3	4	Total
Number of Deals	2	6	5	3	16	5	5	1	2	13
Amount Raised ($M)	$35.00	$102.17	$92.60	$37.30	$267.07	$63.40	$103.00	$10.60	$13.60	$190.60
Source:VentureOne

CAPEX for WiMAX Network Infrastructure

Description	Scenario 1	Scenario 2	Scenario 3	Comments
WiMAX equipment	$35K per base station for four-sector/channel configuration			+$7K per channel for additional channels/sectors
Other base station equipment	$15K			Covers any necessary cabinets, network interface cards, etc.
Backhaul link	$25K for a P-to-P microwave link		$100K	Allows for at least one multiple hop in rural area
Core and edge equipment	$400K	$500K	$100K	Router or ATM switch, NMS, etc.
Spectrum license	Assume $.01 per MHz POP		n/a	Assumes license is acquired via an auction process or other upfront investment
Base station acquisition and civil works	$50K average per base station		$50K	Includes indoor and outdoor site preparation, indoor to outdoor cabling, etc.
Source: WiMAX Forum

Summary of business case scenarios

	Scenario 1	Scenario 2	Scenario 3
Geographical area description	Major city/metropolitan area		Small rurally located city or town
Market segment	Residential	Residential, SME & Wi-Fi backhaul	Residential and SME
Size	125 square kilometer		16 square kilometer
Population	~1,000,000		~25,000
Residential density	6000 HH/square-km in urban center, 1500 HH/square-km in suburban area, 500 HH/square-km in exurban area		600 HH/square-km
Total households	~390,000		~9600
Total SME	n/a	~24,000	n/a
Adoption rate	Four years		Three years
Frequency band	Licensed 3.5 GHz band		Unlicensed 5.8 GHz
Channel BW	3.5 MHz, FDD		10 MHz, TDD
Assumed spectrum	28 MHz (2 × 14 MHz)		60 MHz
Source:WiMAX Forum

WiMAX OPEX summary

OPEX Item	Business case assumptions	Comments
Sales and marketing expense (including customer technical support)	20% of gross revenue in year 1, dropping to 11% in year 5	Higher % of revenue in early years to reflect the fixed costs associated with these expenses; fifth year levels are consistent with levels for a mature stable business
Network operations	10% of gross revenue in year 1 dropping to 7% in year 5
G & A	6% of gross revenue in year 1 dropping to 3% in year 5
Equipment maintenance	5% of CAPEX for base station equipment 7% of operator-owned CPE CAPEX	Reflects higher maintenance costs associated with maintaining remotely located equipment
Base station installation and commissioning	$3K for four-sector base station	One-time expense
CPE install and commissioning	Varies with market segment	Offset by one-time activation fee charged to customer
Base station site lease expense	$1500 per month per base station	Space for indoor equipment plus per-antenna lease fee for outdoor units
Customer site lease expense	$50 per month average for SME market segment	Not applicable for residential market segment
Allowance for bad Debts and churn	12% for residential segment, 3% for SME segment
Source: WiMAX Forum